Microsoft to Apple: Game On

For the past two and a half years, the iPad has ruled the world of tablets. Except for Amazon’s Kindle Fire and the Barnes & Noble Nook, there has been no competition. But with the entry of Microsoft into the fray—including the Surface and an assortment of third-party Windows 8 and Windows RT tablets—the business is about to get a lot more interesting.

I start from the premise that only competition keeps the tech business driving forward and that, in the absence of effective competition, products stultify. This definitely happened with PCs. After Apple failed to respond to the introduction of Windows 95, the Mac market share fell to the low single digits; without effective competition, Microsoft innovation faded. It has been only Apple’s across-the-board success in recent years that has lit a new fire under Microsoft.

Healthy Competition

The iPhone never had the iPad’s grace period. It entered a crowded market, where it had to displace some entrenched market leaders: BlackBerry, Palm, Symbian, and Windows Mobile. Staying on top proved to be surprisingly easy, until Android came along as a serious challenger. There is no doubt that the iPhone and Android have made each other better, and I expect that process to continue, especially if Google can build an app and services ecosystem that rivals Apple’s. The entry of Windows Phone 8 can only improve things, pushing both the iPhone and Android.

The fact that the iPad has improved quite a bit since its 2010 introduction seems largely due to the spillover of iPhone features—better apps, better services, faster processors, and the Retina display— into the tablet space. The first notable effect that tablet competition has had on the iPad is the debut of the iPad mini, which is clearly a response to smaller tablets finding at least some success in the market. Android tablets have suffered from many

problems, but the overwhelming issue is the lack of decent software. The success of iOS devices and even, to some extent, of Android phones has proven that consumers want native apps. Google has had a very hard time seeing beyond the browser, however. The Android app situation remains calamitous, with most of the available choices being blown-up phone apps that are terrible on a 7in tablet and unspeakable on a 10in.

Microsoft is not making this mistake. The selection of Windows RT apps is still quite limited, but Microsoft knows about the care and feeding of developers. The RT apps that are available are designed for the Surface’s display (and those of Windows 8 laptops and tablets) and consistently speak the Modern UI design language common to Windows 8/RT and Windows Phone.

A Mature Ecosystem

Equally important, Surface is being launched into a mature Microsoft ecosystem. Microsoft has spent years seemingly pouring money down the holes of Xbox and what used to be called the Windows Live collection of online services. But now, those investments may be about to pay off, as the company pulls together the entertainment content of Xbox and cloud services such as SkyDrive, Outlook.com, and Office 360–not to mention the deep understanding of cloud services it has gained from its enterprise back-office offerings. iOS devices sold a lot of Macs because they work so well together in the Apple ecosystem. The same dynamic could work for Microsoft in reverse: The vast installed base of Windows PCs could sell both Surfaces and Windows Phones, promoting the advantages of the Microsoft environment.

Surface is not designed as a head-on competitor for the iPad. From its ability to work with USB peripherals to its all-but-mandatory keyboard, it is far more PC-like. It represents a new device class in what is turning out to be a surprisingly big space between smart- phones and traditional PCs.

It’s going to take a while before we can judge the success of the Surface strategy. Microsoft, however, is a patient company that is smart enough not to expect an instant payoff. But by offering a worthy alternative to the iPad, Microsoft has put pressure on Apple to keep its game up. That can only be good for all of us.

When Apple advertised the iPad 3 as “4G”, the ACCC took them to Court. I am continually left to wonder why the ACCC won’t do the same to MS in respect of the Surface. Most people are mature enough to understand that a portion of the storage is used for the Os . . . but when 50% is used by the OS and recovery partition on a 32G device, that’s ridiculous!